Annex A
14. THE RESETTLEMENT GRANT: PROPOSALS TO CHANGE
THE AGE BASIS ON WHICH THE GRANT IS BASED
1. The Resettlement Grant is intended to
assist Members in "adjusting to non-parliamentary life"
when they leave the House at a General Election. Under operational
rules approved by the House, it is paid to the Member once he
or she has met any outstanding liabilities to the House, suppliers
and staff. This is usually about two months after the election.
The grant is a varying proportion of final salary, based on age
and length of service (see Table A).
SSRB RECOMMENDATION
2. The SSRB recommended that Resettlement
Grant eligibility be restricted to Members defeated at a General
Election and those whose seats are abolished by boundary changes.
The grant would be paid at the rate of one month's salary for
each year of service to a maximum of nine months' salary. The
overall rationale appears to be that if an MP has made a choice
to leave, then little or no post-election re-adjustment will be
necessary.
3. We have compared Resettlement Grant eligibility
at the two previous General Elections with the new conditions
suggested by the SSRB:
— 99 Members left the House at the
2001 General Election, receiving an average of 62% of final annual
salary (about £3.2 million). 21 of these Members were defeated,
with an average length of service of 8.5 years. Under the SSRB
recommendation, only these 21 Members would have qualified for
the Resettlement Grant, receiving an average of 48% of final salary
(about £0.5 million).
— 136 Members left the House at the
2005 General Election, receiving an average of 64% of final annual
salary (about £5.3 million). 45 of these Members were defeated,
with an average length of service of 8.6 years. Under the SSRB
recommendation, only 49 Members would have qualified for the Resettlement
Grant, receiving an average of 60% of final salary (total of £1.7
million).
4. No two election results are the same,
but generally the SSRB recommendation could be expected to reduce
eligibility drastically and for those still receiving the grant
to reduce the amount marginally.
ADJUSTING TO
NON-PARLIAMENTARY
LIFE
5. The SSRB report references anecdotal
evidence of "difficulties faced by MPs of all ages in obtaining
new employment." According to a survey of the Association
of Former Members of Parliament[7],
almost half of defeated and deselected ex-Members take more than
three months to find alternative employment. When a large number
of seats change hands, as in 1997, the average time taken to find
new employment increases.
6. The recent submission to the Baker review
and survey of Members have shown concern about the future composition
of the House and that it might be drawn too strongly from those
of independent means. If the House wishes to continue to draw
from all parts of society, care must be taken to ensure that being
an MP is financially feasible for those without independent means,
both during their career and at the end of their service.
ANALOGY TO
REDUNDANCY PAYMENTS
7. The SSRB notes that redundancy payments
are not normally payable to those who retire or resign, but they
fail to recognise that Members often do not know when the next
General Election will be held. Even if they decide to leave the
House at that time, plans and preparations are necessarily affected
by uncertainty. Is it fair to treat them as normal leavers?
8. Withdrawal of the Resettlement Grant
from Members standing down would be difficult to manage. When
a similar system to that now proposed existed, it is said that
Willie Hamilton, after retiring from his Fife Central seat in
1987 stood for South Hams, knowing that he was certain to lose
and therefore receive the Resettlement Grant. Limiting eligibility
to defeated Members only may also slow the natural process of
renewal in the House, encouraging Members to continue standing
until death or defeat instead of departing gracefully.
9. The SSRB recommendation would also prevent
Members who have been deselected from receiving the grant, although
they also say that the "level of the grant should reflect
its purpose and the analogy of redundancy payments." Denial
of the chance to defend their seat is arguably as much a redundancy
as defeat at an election, and a logical system would pay out to
both or neither.
10. From the General Election after next,
Members will only be able to draw their pension from 65, or from
55 with an actuarial reduction (example reductions: at 60, less
25%; at 55, less 42%). Whenever they choose to receive their pension,
Members may take a lump sum payment of up to 25% of total value.
POSSIBLE SOLUTIONS
11. The SSRB report touches on genuine issues,
including the difficulties faced by Members with young families.
The SSRB suggest that the current system for calculating the grant
is inadequate, but its "one-size-fits-all" approach
does not appear to solve the real problems inherent in the system.
Instead by re-ordering the calculation table it can be made better
to reflect the parliamentary cycle and the turnover of Members
(see Table B). Table B is ordered around a few fresh propositions:
(i) Completed years of service—The
current range is between 10 and 15 years of service. This means
that only Members who have served in three Parliaments actually
fall on the calculation grid and they are likely to cluster together.
Anecdotal evidence suggests that two Parliaments away from their
profession puts Members returning to the job market at a disadvantage
and using blocks of four years would ensure that the Resettlement
Grant available reflects this, as well as attempting to relate
such payments to the rhythm of what are usually four-year Parliaments.
(ii) Analogy to redundancy payments—Currently
a Member of 64 with 15+ years' service receives 100% of salary
and is almost immediately able to draw their pension. Whereas
in much of the public sector pension enhancement on redundancy
is at its greatest up to the age of around 53 (although this threshold
will shift gradually upwards towards 58 now that the retirement
age is moving to 65). We would suggest moving the 100% bracket
forward to target Members who are still some years from their
pension but whose prime professional years (30-50) have largely
been spent in the House. We would also recognise Members less
than 50 years old who have served for more than one Parliament
to fulfil the "redundancy" element of this Grant.
(iii) Age of Member—The percentage
change each year means that a Member of 51 could receive nearly
20% more than a colleague of 49 who retired at the same time.
We propose the introduction of age brackets to minimise this disparity.
(iv) Percentage changes—In the
course of our research we have found no reason for the small and
irregular percentage increments in the current table. To simplify
matters increments of 10% could be used.
COSTS
12. Cost estimates of Table B when applied
to the 2001 and 2005 elections are:
— In 2001, compared to the actual figure
of £3.2 million using Table A, Table B would have cost an
additional £0.04 million (1.5%).
— In 2005, compared to the actual figure
of £5.3 million using Table A, Table B would have cost an
additional £0.32 million (6%).
A HYBRID SOLUTION
13. If the MEC wished to have a system which
"nodded" in the direction of the SSRB it could adopt
Table B (or indeed retain Table A) but decide that Members leaving
the House voluntarily should get a flat rate of 50% of salary
only irrespective of age and service. This would have a cost saving.
CONCLUSION
14. The MEC's views are requested.
(i) The SSRB's recommendation;
(ii) A system similar to now with Table B
instead of Table A;
(iii) A hybrid as set out in paragraph 13
above.
Annex B
Cm 7270-1, PAGES 56-57
COMPENSATION ON
LEAVING OFFICE
5.60 The Resettlement Grant is payable when
an MP leaves the House after a general election. It is calculated
as a proportion of salary ranging between 50 and 100% of final
salary, dependent on age and length of service. If an MP stands
down during the course of a Parliament for ill health reasons,
an ill health retirement grant is payable, calculated in the same
way as the Resettlement Grant (as well as an immediate pension
based on the service the MP would have accrued if he or she had
continued to serve until age 65). The Table at Appendix E sets
out the percentages of salary payable. The first £30,000
of the Resettlement Grant is tax free.
5.61 We were asked to consider the operation
of the Resettlement Grant in the light of age discrimination legislation.
MPs are not "employed" but are elected office holders
and as such the age discrimination legislation does not apply
to them. However, the arrangements for the grant are contrary
to the principle of the legislation and, as discussed in our last
report, we believe there is a case for revisiting the structure
of the grant.
5.62 The grant is designed to assist with
the costs of "adjusting to non-parliamentary life" and
currently pays most to those aged between 55 and 64 who have been
in the House for 15 years or more. However we heard anecdotal
evidence of difficulties faced by MPs of all ages in obtaining
new employment and it was pointed out that those with young families
faced particular difficulties. The grant is thus designed to fulfil
much the same purpose as redundancy payments. Such payments are
not normally made to workers who retire or resign. Moreover, the
level of payments varies according to length of service. We believe
the Resettlement Grant should be aligned with those principles
and therefore recommend that it be paid only to MPs who have stood
unsuccessfully at a general election or whose seats have been
abolished as a result of boundary changes. (MPs who are deselected
by their parties, or whose constituencies are changed but not
abolished would not be entitled to a Resettlement Grant unless
they stood and were defeated at the next election.)
5.63 We also think that the level of the
grant should reflect its purpose and the analogy of redundancy
payments. We therefore recommend that the Resettlement Grant be
calculated as one months' salary for each full year of an MP's
service in the House, up to a maximum of nine months' salary.
5.64 We acknowledge that MPs may have taken
decisions and made plans based on current arrangements and we
therefore recommend that changes to the Resettlement Grant do
not take effect until after the next general election.
Recommendation 30: We recommend that, with effect
from the general election after next, Resettlement Grant should
be paid at a rate of one month's salary for each year of service
as an MP, up to a maximum of nine months' salary, to MPs who lose
their seats at a general election or whose seats disappear as
a result of boundary changes.
7 Life After Losing Or Leaving, a report for the Association
of Former Members of Parliament. School of Politics and International
Studies, University of Leeds October 2007 Back
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